<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 000-22023
MACROVISION CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 77-0156161
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1341 Orleans Drive
Sunnyvale, California 94089
(Address of principal executive offices) (Zip code)
(408) 743-8600
(Registrant's telephone number including area code)
Not applicable
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
--- ---
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APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a
court.
Yes ____ No ____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title Outstanding as of July 31, 1997
Common Stock 7,145,424
Transitional Small Business Disclosure Format (check one):
Yes No X
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MACROVISION CORPORATION
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
as of June 30, 1997 (unaudited) and December 31, 1996 . . . . 4
Condensed Consolidated Statements of Operations (unaudited)
for the Three Month Periods Ended June 30, 1997 and 1996,
and Six Months Ended June 30, 1997 and 1996 . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows (unaudited)
for the Six Month Periods Ended June 30, 1997 and 1996. . . . 6
Notes to Condensed Financial Statements . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 2-3 Not Applicable
Item 4 Submission of Matters to a Vote of Security Holders . . . . . . . 13
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MACROVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, December 31,
1997 1996
----------- ------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 2,549 $ 2,409
Short-term investments 13,385 -
Accounts receivable, less allowance for doubtful
accounts of $418 and $267 4,121 3,376
Inventories 620 550
Deferred tax assets 1,414 929
Prepaid expenses and other assets 399 186
------- -------
Total current assets 22,488 7,450
Property and equipment, net 1,813 2,017
Patents and other intangibles, net 1,132 1,161
Other assets 1,070 1,325
------- -------
$26,503 $11,953
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 903 $ 1,073
Accrued expenses 2,371 2,713
Deferred revenue 1,305 749
Income taxes payable 648 585
Current portion of capital lease 106 105
------- -------
Total current liabilities 5,333 5,225
Capital lease liability 242 296
Deferred tax liabilities 361 360
------- -------
TOTAL LIABILITIES 5,936 5,881
Stockholders' equity:
Preferred stock - 1
Common stock 7 4
Additional paid-in capital 22,858 9,530
Stockholders note receivable (157) (157)
Deferred stock compensation (168) (240)
Accumulated deficit (1,776) (2,931)
Accumulated translation adjustment (182) (135)
Unrealized loss on investments (15) -
------- -------
TOTAL STOCKHOLDERS' EQUITY 20,567 6,072
------- -------
$26,503 $11,953
======= =======
See the accompanying notes to these condensed consolidated financial statements.
4
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MACROVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except per Share Data)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net revenues $4,722 $3,737 $9,286 $7,320
Costs and expenses:
Cost of revenues 697 707 1,378 1,301
Research and development 516 679 1,073 1,321
Selling and marketing 1,378 1,296 2,926 2,537
General and administrative 1,018 875 1,897 1,476
------ ------ ------ ------
Total costs and expenses 3,609 3,557 7,274 6,635
------ ------ ------ ------
Operating income from continuing operations 1,113 180 2,012 685
Interest and other expense, net 149 (109) 173 (229)
------ ------ ------ ------
Income from continuing operations
before income taxes 1,262 71 2,185 456
Provision for income taxes 505 62 874 254
------ ------ ------ ------
Net income from continuing operations 757 9 1,311 202
Loss from discontinued operations, net - 632 - 827
------ ------ ------ ------
Net income (loss) $ 757 $ (623) $1,311 $ (625)
====== ====== ====== ======
Computation of earnings per share:
Net income from continuing operations $ 757 $ 9 $1,311 $ 202
Preferred stock dividends - (113) (156) (225)
------ ------ ------ ------
Adjusted net income (loss) from continuing
operations 757 (104) 1,155 (23)
Discontinued operations - (632) - (827)
------ ------ ------ ------
Earnings (loss) applicable to common stock $ 757 $ (736) $1,155 $ (850)
====== ====== ====== ======
Earnings (loss) per share:
Continuing operations $ 0.10 $(0.02) $ 0.18 $(0.01)
Discontinued operations - (0.15) - (0.19)
------ ------ ------ ------
Net Income $ 0.10 $(0.17) $ 0.18 $(0.20)
====== ====== ====== ======
Shares used in computing earnings per share 7,573 4,349 6,238 4,347
</TABLE>
See the accompanying notes to these condensed consolidated financial statements.
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MACROVISION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
-------- ------
<S> <C> <C>
Net cash provided (used) by operating activities $ 666 $ (244)
Cash flows from investing activities:
Purchases of short-term investments (13,400) -
Sales of short-term investments - 1,200
Investment in related party (247) -
Acquisition of property and equipment (301) (234)
Payments for patents and other intangibles (151) (195)
Other, net (91) 5
-------- ------
Net cash (used in) provided by investing activities (14,190) 776
Cash flows from financing activities:
Payments on capital lease obligations (53) (66)
Payments on long-term debt - (696)
Proceeds from issuance of common stock, net 13,873 20
Cash dividends (156) (113)
-------- ------
Net cash provided by (used in) financing
activities 13,664 (855)
-------- ------
Net increase (decrease) in cash and cash equivalents 140 (323)
Cash and cash equivalents at beginning of period 2,409 2,286
-------- ------
Cash and cash equivalents at end of period $ 2,549 $1,963
======== ======
</TABLE>
See the accompanying notes to these condensed consolidated financial statements.
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MACROVISION CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by Macrovision Corporation (the "Company") in accordance with
the rules and regulations of the Securities and Exchange Commission (SEC).
Certain information and footnote disclosure, normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted in accordance with such rules and
regulations. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
the financial position of the Company, and its results of operations and cash
flows for those periods presented. This quarterly report on Form 10-QSB
should be read in conjunction with the audited financial statements and notes
thereto for the year ended December 31, 1996 included in the Company's
Registration Statement on Form SB-2 (Registration No. 333-19373), which was
declared effective by the SEC on March 12, 1997.
The results of operations for the interim periods presented are not
necessarily indicative of the results expected for the entire year ending
December 31, 1997 or any other future interim period, and the Company makes
no representations related thereto.
NOTE 2: CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments purchased with original
maturities of three months or less at date of acquisition to be cash
equivalents.
Investments held by the Company are classified as "available-for-sale" and
are carried at fair value based on quoted market prices, with unrealized
gains and losses, if material, reported in stockholders' equity. Such
investments consist of U.S. government or agency issues with original
maturities beyond 3 months and less than 12 months.
Gross
Amortized Cost Unrealized loss Fair Value
-------------- --------------- ----------
Government Bonds $10,401 $15 $10,386
Auction rate preferred stock 2,000 - 2,000
Government agency securities 999 - 999
------- --- -------
$13,400 $15 $13,385
NOTE 3 - EXCERCISE OF OPTION RELATED TO THE INITIAL PUBLIC OFFERING
On April 16, 1997, the Underwriters exercised their option pursuant to the
initial public offering and purchased an additional 330,000 shares of Common
Stock at a price of $9.00 per share. The net proceeds to the Company from
the Option, after underwriting discounts and commissions and other expenses
of the Offering, were approximately $2.7 million.
Also, during the quarter ended June 30, 1997, the Company issued 29,229
shares of common stock and received proceeds of approximately $79,000
associated with the exercise of stock options.
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NOTE 4 - INVENTORIES
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market and consisted of the following:
June 30, December 31,
1997 1996
-------- ----------
Raw materials $276,000 $ 260,000
Work-in-process 134,000 73,000
Finished goods 210,000 217,000
-------- ----------
$620,000 $ 550,000
======== ==========
NOTE 5 - NET EARNINGS (LOSS) PER SHARE
Net earnings (loss) per share for the periods presented was determined using
the weighted average number of shares of common stock and dilutive common
equivalent shares from stock options using the treasury stock method.
Pursuant to the rules of the SEC all common and common equivalent shares
issued within 12 months of the initial filing of the registration statement
have been included in the computation of net earnings (loss) per share for
the respective periods as if they were outstanding for the entire period.
NOTE 6 - CONTINGENCIES
In October 1995, a former officer and director of the Company filed suit
against the Company in the Superior Court of the State of California alleging
monetary damages suffered as a result of alleged fraud, misrepresentation,
and other malfeasance in connection with the Company's grant of stock options
to him. Mr. Swyt maintains that the Company induced him to accept employment
by falsely representing to him that the options granted to him eventually
would have substantial value. Between August 1990 and December 1993, the
Company granted to him options to purchase approximately 200,000 shares of
the Company's common stock with per share exercise prices of $2.25 or $2.70.
Substantially all of these options expired unexercised within three months
following his departure from the Company in June 1995. In December 1996, the
court ordered this matter to binding arbitration in accordance with a written
agreement between him and the Company. The arbitration agreement contains
limitations on the types of damages available to him and expressly precludes
punitive damages. Mr. Swyt filed his claim in arbitration for this matter
with the American Arbitration Association in June 1997 and the arbitration is
proceeding. The Company believes that the case is without merit and intends
to contest it vigorously. In the opinion of counsel, it is not possible to
determine with precision the probable outcome or the amount of liability, if
any, under this lawsuit.
NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) recently issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS
No. 128 requires the presentation of basic earnings per share (EPS) and, for
companies with complex capital structure diluted EPS. SFAS No. 128 is
effective for annual and interim periods ending after December 31, 1997. The
Company expects that basic EPS will be higher than primary earnings per share
as presented in the accompanying consolidated financial statements and that
diluted EPS will not differ materially from fully diluted earnings per share
as presented in the accompanying consolidated financial statements.
The FASB also recently issued SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 130 and 131 are
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effective for fiscal 1998. The Company is currently evaluating the impact of
these statements on the consolidated financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THE FOLLOWING DISCUSSION IN THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
PREDICTIONS OF FUTURE EVENTS ARE INHERENTLY UNCERTAIN. ACTUAL EVENTS COULD
DIFFER MATERIALLY FROM THOSE PREDICTED IN THE FORWARD LOOKING STATEMENTS AS A
RESULT OF THE RISKS SET FORTH IN THIS FORM 10-QSB AND IN THE RISK FACTORS
SECTION OF THE COMPANY'S PROSPECTUS DATED MARCH 12, 1997, INCLUDED IN THE
COMPANY'S REGISTRATION STATEMENT ON FORM SB-2 (REGISTRATION NO. 333-19373),
WHICH WAS DECLARED EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION ON
MARCH 12, 1997. THERE ARE NO ASSURANCES THAT THE COMPANY HAS IDENTIFIED ALL
POSSIBLE PROBLEMS WHICH THE COMPANY MIGHT FACE. ALL INVESTORS SHOULD
CAREFULLY READ THE COMPANY'S REGISTRATION STATEMENT ON FORM SB-2, TOGETHER
WITH THIS FORM 10-QSB, AND CONSIDER ALL SUCH RISKS BEFORE MAKING AN
INVESTMENT DECISION WITH RESPECT TO THE COMPANY'S STOCK.
OVERVIEW
The Company was founded in 1983 to develop video security solutions for major
motion picture studios and independent video producers. Since that time, the
Company has derived most of its revenues and operating income from licensing
its video copy protection technologies. The revenues of the Company
primarily consists of licensing fees for videocassette copy protection,
licensing of digital Pay-Per-View copy protection, licensing and selling
products incorporating its PhaseKrypt video scrambling technology to cable
television system operators, law enforcement agencies, television
broadcasters, private analog satellite networks and in its licensing of
CineGuard motion picture theaters.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
NET REVENUES
Consolidated net revenues for the second quarter of 1997 increased to $4.7
million or 26% from $3.7 million in the second quarter of 1996. Revenues in
the Copy Protection group increased 16% to $4.0 million from $3.5 million and
revenues in the Video Scrambling group increased 163% to $659,000 from
$250,000. Revenues in the Copy Protection group during the second quarter of
1997 included revenues from packaged media of $3.0 million which was 2% or
$84,000 lower than the second quarter of 1996. This was due in part to the
lower number of video releases during the second quarter of 1997 as compared
to the second quarter of 1996. As in the first quarter of 1997, the second
quarter continued with increased DVD copy protection royalty revenue from
replication of DVDs and license fees from PC manufacturers which did not
exist in the second quarter of 1996. The other component of Copy Protection
revenue is Pay Per View which in the second quarter of 1997 was 185% or
$640,000 higher than the second quarter of 1996. Revenue growth in the Pay
Per View area is primarily due to an increase in system operator license fees
and an increased number of set top boxes employing the Company's technology
shipped by manufacturers during the quarter. Revenues in the Video
Scrambling group during the second quarter of 1997 included revenues from
scrambling equipment of $315,000 which was 252% or $225,000 higher than the
second quarter of 1996. This was due in part to increased sales of the
VES-TM product and the introduction of a new product, the VES-MX. The analog
decoding component of Video Scrambling also saw an increase of $183,000 to
$344,000 from the second quarter of 1996 which was derived from business in
South America and Southeast Asia.
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GROSS MARGIN
Gross margin for the second quarter of 1997 was 85% compared to 81% for the
second quarter of 1996. The Company's gross margin is influenced by the sales
mix which in the second quarter of 1997 benefited from increased license fees
and higher margined royalty based revenue versus lower margined product
sales. Cost of sales includes items such as product costs, duplicator fees,
patent amortization and mastering costs.
RESEARCH AND DEVELOPMENT
Research and Development expenses decreased by $163,000 or 24% in the second
quarter of 1997 compared to the second quarter of 1996 primarily due to a
reduction in consulting fees and engineering supplies associated with the
completion of the VES-TM product during 1996.
SELLING & MARKETING
Selling and marketing expenses increased by $82,000 or 6% in the second
quarter of 1997 compared to the second quarter of 1996 primarily due to
increased sales efforts in Pay Per View and Video Scrambling.
GENERAL & ADMINISTRATIVE
General and administrative expenses increased by $143,000 or 16% in the
second quarter of 1997 compared to the second quarter of 1996 primarily due
to an increase in the number of employees and expenses associated with the
costs associated with being a public company as well as support for the
growing businesses of Pay Per View, DVD and Video Scrambling.
INTEREST AND OTHER EXPENSE
Other income during the second quarter of 1997 benefited from interest income
earned on the IPO proceeds. The second quarter of 1996 included interest
expense on the Company's convertible debt which was converted into preferred
stock during the third quarter of 1996.
PROVISION FOR INCOME TAXES
Income tax expense represents combined federal and state taxes at an
effective rate of 40% and 87% from continuing operations for the three months
ended June 30, 1997 and 1996, respectively. The higher rate for 1996 was due
to higher foreign taxes related to income in the quarter.
NET INCOME (LOSS)
Net income from continuing operations for the second quarter of 1997 was
$757,000 compared to the second quarter of 1996 which was $9,000.
Net income for the second quarter of 1997 was $757,000 as compared to a loss
of $623,000 which included the loss from the discontinued operations of
Command Audio Corporation.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
NET REVENUES
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Consolidated net revenues for the first six months of 1997 increased to $9.3
million or 27% from $7.3 million in the first six months of 1996. Revenues
in the Copy Protection group increased 12% to $7.6 million from $6.8 million
and revenues in the Video Scrambling group increased 210% to $1.6 million
from $.5 million. Revenues in the Copy Protection group during the first six
months of 1997 included lower revenues from packaged media due in part to the
lower number of video releases during the period as compared to the first six
months of 1996. During 1997, the Company recorded its first DVD copy
protection royalty revenue from replication of DVDs and license fees from PC
manufacturers which did not exist in 1996. The other component of Copy
Protection revenue is Pay Per View which in the first six months of 1997 was
167% higher or $1.1 million than the comparable period of 1996. Revenue
growth in the Pay Per View area is primarily due to an increase in system
operator license fees and an increased number of set top boxes shipped during
the period. Revenues in the Video Scrambling Group during the first six
months of 1997 included revenues from scrambling equipment of $591,000 which
was 90% or $279,000 higher compared to the six months ended June 30, 1996
which was a result in part to higher shipments of the VES-TM product and the
introduction of a new product, the VES-MX. In the first six months of 1997,
the analog decoding component of Video Scrambling saw an increase of 386% or
$825,000 compared to the first six months of 1996 resulting from business in
South America and Southeast Asia.
GROSS MARGIN
Gross margin for the six months ended June 30, 1997 was 85% compared to 82%
for the comparable period of 1996. The Company's gross margin is influenced
by the sales mix which in 1997 benefited from increased license fees and
higher margined royalty based revenue versus lower margined product sales.
Cost of sales includes items such as product costs, duplicator fees, patent
amortization and mastering costs.
RESEARCH AND DEVELOPMENT
Research and Development expenses decreased by $248,000 or 19% during the
first half of 1997 compared to the same period in 1996 primarily due to a
reduction in the number of employees, consulting fees and engineering
supplies associated with the completion of the VES-TM product during 1996.
SELLING & MARKETING
Selling and marketing expenses increased by $389,000 or 15% during the first
half of 1997 compared to the same period in 1996 primarily due to an increase
sales efforts in Pay Per View and Video Scrambling.
GENERAL & ADMINISTRATIVE
General and administrative expenses increased by $421,000 or 29% during the
first half of 1997 compared to the same period in 1996 primarily due to an
increase in the number of employees and expenses associated with the costs
associated with being a public company as well as support for the growing
businesses of Pay Per View, DVD and Video Scrambling.
INTEREST AND OTHER EXPENSE
Other income during the first six months of 1997 benefited from interest
income earned on the IPO proceeds. The first six months of 1996 included
interest expense on the Company's convertible debt which was converted into
preferred stock during the third quarter of 1996.
PROVISION FOR INCOME TAXES
Income tax expense represents combined federal and state taxes at an
effective rate of 40% and 56% from continuing operations for the six months
ended June 30, 1997 and 1996, respectively. The higher rate for 1996 was due
to higher foreign taxes from higher foreign income in the first six months of
1996.
NET INCOME (LOSS)
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Net income from continuing operations for the six months ended June 30, 1997
was $1.3 million compared to $200,000 for the first six months of 1996.
Net income for the first six months of 1997 was $1.3 million compared to a
loss of $625,000 which included the loss from the discontinued operations of
Command Audio Corporation.
LIQUIDITY AND CAPITAL RESOURCES
On April 16, 1997, the Underwriters exercised their option pursuant to the
initial public offering (IPO) of 330,000 shares of its Common Stock at a
price of $9.00 per share. The net proceeds to the Company from the Option,
after underwriting discounts and commissions and other expenses of the
Offering, were approximately $2.7 million. The Company has financed its
operations primarily from cash generated by operations, principally by its
videocassette copy protection business. The Company's operating activities
provided net cash of $666,000 and used $244,000 for the six months ending
June 30, 1997 and 1996, respectively. In each of these periods, net cash was
provided primarily by net income from continuing operations and an increase
in deferred revenue partially offset by increases in accounts receivable and
deferred taxes, with discontinued operations primarily creating the usage in
1996.
The Company made capital expenditures of $301,000 and $234,000 in the first
six months ending June 30, 1997 and 1996, respectively. The Company also
paid $151,000 and $195,000 in the six months ended June 30, 1997 and 1996,
respectively, for patents and other intangibles. The proceeds from the IPO
have been invested in various cash equivalents and short term securities.
During the quarter ended June 30, 1997, the Company invested $247,000 in
Command Audio Corporation (CAC) maintaining its 19.8% ownership in CAC as a
result of a successful round of third-party financing obtained by CAC. The
Company intends to hold this investment for the long-term and monitors the
recoverability of this investment based on management's estimates of the fair
value of CAC based on the achievements of milestones specified in CAC's
business plan as well as new recent third party financing rounds. The
Company accounts for the investment in CAC by the cost method. The Company
is not obligated by contract to provide future funding to CAC and does not
have the ability to exert significant influence over the financial and
operating policies of CAC.
The Company believes that the net proceeds of its initial public offering,
together with available funds and cash flows generated from operations will
be sufficient to meet its working capital and capital expenditure
requirements through 1997. The Company may also utilize cash to acquire or
invest in complementary businesses or to obtain the right to use
complementary technologies.
The Company paid interest of $6,000 and $260,000 in the six months ended June
30, 1997 and 1996, respectively. The interest expense paid in 1996 was
primarily from the convertible note.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In October 1995, a former officer and director of the Company filed suit
against the Company in the Superior Court of the State of California alleging
monetary damages suffered as a result of alleged fraud, misrepresentation,
and other malfeasance in connection with the Company's grant of stock options
to him. Mr. Swyt maintains that the Company induced him to accept employment
by falsely representing to him that the options granted to him eventually
would have substantial value. Between August 1990 and December 1993, the
Company granted to him options to purchase approximately 200,000 shares of
the Company's common stock with per share exercise prices of $2.25 or $2.70.
Substantially all of these options expired unexercised within three months
following his departure from the Company in June 1995. In December 1996, the
court ordered this matter to binding arbitration in accordance with a written
agreement between him and the Company. The arbitration agreement contains
limitations on the types of damages available to him and expressly precludes
punitive damages. Mr. Swyt filed his claim in arbitration for this matter
with the American Arbitration Association in June 1997 and the arbitration is
proceeding. The Company believes that the case is without merit and intends
to contest it vigorously. In the opinion of counsel, it is not possible to
determine with precision the probable outcome or the amount of liability, if
any, under this lawsuit.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fiscal quarter ended June 30, 1997, there were no submission of
matters to the vote of security holders.
ITEM 5 - OTHER INFORMATION.
ITEM 5.1 - In June 1997, the Board of Directors approved an increase to
the Board of Directors to allow for seven members. The Board approved the
election of Tom Wertheimer, an independent director, which brings the
Board membership to six.
ITEM 5.2 - In July 1997, the Company invested an additional $138,000 in
Command Audio Corporation (CAC) maintaining its 19.8% ownership in CAC
based on a successful round of third-party financing obtained by CAC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
11.1 - Schedule of Computation of Earnings (Loss) Per Share.
27.1 - Financial Data Schedule.
(b) Reports on Form 8-K.
During the quarter ended June 30, 1997, the Company filed no Current
Reports on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Macrovision Corporation
Date: August 13, 1997 By: /s/ William A. Krepick
----------------------------------------------
William A. Krepick,
President and Chief Operating Officer
Date: August 13, 1997 By: /s/ Victor A. Viegas
----------------------------------------------
Victor A. Viegas,
Vice President, Finance and Administration
and Chief Financial Officer
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Exhibit 11.1
MACROVISION CORPORATION AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF NET EARNINGS (LOSS) PER SHARE
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------ ------- ------ ------
<S> <C> <C> <C> <C>
Computation of earnings (loss) per share:
Net income from continuing operations $ 757 $ 9 $1,311 $ 202
Preferred stock dividends - (113) (156) (225)
------ ------- ------ ------
Adjusted net income (loss) from continuing operations 757 (104) 1,155 (23)
Discontinued operations - (632) - (827)
------ ------- ------ ------
Earnings (loss) applicable to common stock $ 757 $ (736) $1,155 $ (850)
====== ======= ====== ======
Earnings (loss) per share:
Continuing operations $ 0.10 $(0.02) $ 0.18 $(0.01)
Discontinued operations - (0.15) - (0.19)
------ ------- ------ ------
Net earnings (loss) $ 0.10 $(0.17) $ 0.18 $(0.20)
====== ======= ====== ======
Weighted average common shares outstanding 7,065 3,643 5,778 3,638
Weighted average common equivalent shares from stock 508 461 460 464
options calculated using the treasury stock method
Common equivalent shares from common shares issued
and stock options granted within twelve months of
the initial public offering, included pursuant to Staff
Accounting Bullentin No. 83 - 245 - 245
------ ------- ------ ------
Shares used to compute net earnings (loss) per share 7,573 4,349 6,238 4,347
====== ======= ====== ======
</TABLE>
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MACROVISION CORPORATION FOR THE SIX MONTHS ENDED
JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,549
<SECURITIES> 13,385
<RECEIVABLES> 4,121
<ALLOWANCES> 418
<INVENTORY> 620
<CURRENT-ASSETS> 22,488
<PP&E> 4,496
<DEPRECIATION> 2,683
<TOTAL-ASSETS> 26,503
<CURRENT-LIABILITIES> 5,333
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 22,858
<TOTAL-LIABILITY-AND-EQUITY> 26,503
<SALES> 9,286
<TOTAL-REVENUES> 9,286
<CGS> 1,378
<TOTAL-COSTS> 1,378
<OTHER-EXPENSES> 5,896
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 2,185
<INCOME-TAX> 874
<INCOME-CONTINUING> 1,311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,311
<EPS-PRIMARY> .18
<EPS-DILUTED> 0
</TABLE>
